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Govt said to plan completing $4.5 billion HPCL share sale to ONGC this year

LiveMint logoLiveMint 01-06-2017 Debjit Chakraborty

New Delhi: The Indian government is planning to sell a stake valued at $4.5 billion in state-refiner Hindustan Petroleum Corp. to the country’s biggest explorer this year as part of its plans to create a state-owned oil giant, according to people with knowledge of the matter.

The government plans to sell its 51.1% holding in India’s third-largest refiner to Oil & Natural Gas Corp. and the final model for combining the two state-run companies will be decided in a few months, said the people, who asked not to be identified because the information isn’t public. The oil ministry favours turning HPCL into a unit of ONGC instead of merging the two companies, one of the people said. Finance ministry spokesman D.S. Malik, ONGC and HPCL spokesmen declined to comment.

India said in February it plans to create an oil giant through consolidation and mergers that could compare with international companies and withstand volatility in oil prices. The stake sale will also help the government meet its ambitious disinvestment target.

The stake is worth Rs28,770 crore ($4.5 billion) based on Wednesday’s closing price, and will help meet 40% of India’s target to raise Rs72,500 crore target from asset sales in the year ending March. Prime Minister Narendra Modi’s administration exceeded the target for asset sales last year garnering Rs46,247 crore.

HPCL shares fell as much as 2.4% to Rs54,095 crore while ONGC dropped 1.6% in Mumbai. The S&P BSE Sensex rose as much as 0.2%.

The cabinet approved a plan in April to sell as much as 25% of 11 state-run companies, including Rail Vikas Nigam Ltd. and IRCON International, through public offerings.

The HPCL stake sale may not trigger an open-offer rule as the government’s holding is being transferred to another state-run firm and the ownership isn’t changing, one of the people said. Under India’s takeover code, if a company acquires more than 25% in another listed company, it has to make an open offer to buy at least 26% more in the target firm.

ONGC had surplus cash of Rs13,014 crore as on 31 March against Rs24,690 crore a year earlier, according to an exchange filing. Bloomberg

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